Unit labour requirement for beer, in hours: ALB = 3 Unit capital requirement for beer, in hours: aKB = 6 There are 1,000 man-hours of labour available and 1,200 machine-hours of capital available. Holland begins with no trade. Explain which good is more capital intensive and show how you calculate this. Draw the production possibility frontier, with cars on the y-axis and beer on the x- axis, and label each frontier line. Shade the area of possible production. Indicate at which point on the PPF both factors are being fully used. What are the implications of being away from this point? To the right of the point you have indicated, what happens to the opportunity cost of producing more beer? Explain why this is and calculate the opportunity cost of increasing beer production on both sides of the point.

Unit labour requirement for beer, in hours: ALB = 3 Unit capital requirement for beer, in hours: aKB = 6 There are 1,000 man-hours of labour available and 1,200 machine-hours of capital available. Holland begins with no trade. Explain which good is more capital intensive and show how you calculate this. Draw the production possibility frontier, with cars on the y-axis and beer on the x- axis, and label each frontier line. Shade the area of possible production. Indicate at which point on the PPF both factors are being fully used. What are the implications of being away from this point? To the right of the point you have indicated, what happens to the opportunity cost of producing more beer? Explain why this is and calculate the opportunity cost of increasing beer production on both sides of the point.

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter7: Production, Inputs, And Cost: Building Blocks For Supply Analysis

Section: Chapter Questions

Problem 9TY

See similar textbooks

Similar questions

Show graphically why the problem of outsourcing production to China, Mexico and elsewhere is a good move economically for many companies: (consider isoquant and isocosts maps for USA and for China)
1. Pekan Nenas has 20 competitive pineapple orchards, all of which sell pineapples at the world price of RM2 per pineapple. The following equations describe the production function and the marginal product of labor in each orchard: where Q is the number of pineapples produced in a day, L is the number of workers, and MPL is the marginal product of labor. (a) (b) (c) Q = 100L - L² MPL = 100 - 2L, (d) What is each orchard's labor demand as a function of the daily wage W? What is the market's labor demand? Pekan Nenas has 200 workers who supply their labor inelastically. Solve for the wage W. How many workers does each orchard hire? How much profit does each orchard owner make? Calculate what happens to the income of workers and orchard owners if the world price doubles to RM4 per pineapple. Now suppose that the price is back at RM2 per pineapple but a flood destroys half the orchards. Calculate how the flood affects the income of each worker and of each remaining orchard owner. What…
Fill in the missing parts in the following tables to illustrate the behavior of production and costs in the short-run; then determine the optimal level of production according to the number of inputs you are intending to use. Output Units Land Square Meters Capital Egyptian Pounds Labor Units 0 20 40000 0 1000 20 40000 5 1600 20 40000 8 2100 20 40000 11 2500 20 40000 14 2600 20 40000 17 Output FC VC TC MCL MPL AVC AFC ATC 0 1000 1600 2100 2500 2600 -Hint Consider land and capital as fixed factors, while labor units as variable factors. The cost of land is L.E20 per square meter. The interest rate on capital is 10%. The average wages per unit of labor is L.E1500.
a. Under autarky (in absence of trade), a unit cost of labor (w) is $40 and a unit cost of capital (r) is $20 in the U.S. Draw the minimum-total-cost isocost line to produce 100 units of vaccines and label it as "(w/r)us" on the isoquant diagram of vaccines, attached to this instruction sheet. Indicate an optimal point on your diagram and label it as "US". At the optimal point, how many units of labor and capital will be used?
What is the relationship between economies of scale and intra-industry trade? Group of answer choices Intra-industry trade brings competition and diverse products to markets where economies of scale would otherwise promote fewer firms and fewer product options Intra-industry trade reduces competition and product variety in markets where economies of scale would otherwise promote competition and diverse products. As average total cost increases, intra-industry trade increases As average total cost decreases, intra-industry trade decreases.
1. Imagine that there is an industry for a particular product where the demand for this product is given by P = 100-X. There are two factors of production, capital K and labor L; the price of each will be $1 throughout. The firms all have identical technology, which is given by a fixed coefficients production function: where Y is the level of output and a is some constant from (0, 1). Each firm has fixed costs of 16. (a) Suppose there are precisely six firms in this industry; they can exit if they are unprofitable, but no firms can enter. What is the long-run equilibrium in this case? (Even though there are only six firms, they all entertain competitive conjectures about their effect on various prices.) (b) Suppose there is free entry into this industry. What is the long-run equilibrium? 2. Suppose one firm in a general equilibrium economy has a technology with free disposal Prove that Walrasian equilibrium prices are nonnegative.
Use the firm's long-run cost-minimizing decision rule to explain the differences in the relative use of capital and labor in agriculture in the United States and the Peoples Republic of China
10. Extension of the Cobb-Douglas Production Function-The Cobb-Douglas produc- tion function (Equation 7.16) can be shown to be a special case of a larger class of linear homogeneous production functions having the following mathematical form:" Q = y[@K* + (1 – a)L°]W/P where y is an efficiency parameter that shows the output resulting from given quantities of inputs; a is a distribution parameter (0 sas 1) that indicates the division of factor income between capital and labor; p is a substitution parameter that is a measure of substitutability of capital for labor (or vice versa) in the pro- duction process; and v is a scale parameter (v > 0) that indicates the type of re- turns to scale (increasing, constant, or decreasing). Show that when v = 1, this function exhibits constant returns to scale. [Hint: Increase capital K and labor L each by a factor of A, or K* = (A)K and L* = (1)L, and show that output Q also increases by a factor of A, or Q* = (A)(Q).]
(04.Suppose we are given (he constant returns to scale (CES) production function q= { ßa + aa }1/a a. Show that the marginal product of Beta is (g/B) and marginal product of Alpha (q/a)** b. Show that RTS = (2/B); I lence or otherwise shov that the ò =-1/(1-a) 1-a
Problem 1 Suppose firms have a CES production technology Y = [(AK)º + L°JË where -o
A company manufactures two products, X and Y, and the joint-cost function of these products is given by c=x+4y where c is the total cost of producing v units of X and y units of Y Determine the marginal cost with respect to y when x=36 and y=16 b. The production function for a company's product is O-20, where is the output that results from /units of labor and & units of capital. The unit cost of labor and capital are $225 and $150, respectively. The company wants the total cost of puts to be $270,000 Find the number of units of capital and labor that maximize production
Noah and Naomi want to produce 300 garden benches per week in two production plants. The cost functions at the two plants are C1(Q1)=800Q1−2(Q1)^2and C2(Q2)=850Q2−3(Q2)^2The corresponding marginal costs are MC1=800−4Q1and MC2=850−6Q2What is the best assignment of output between the two plants?Instructions: Enter your answers as whole numbers.Noah and Naomi should produce benches at plant 1 and benches at plant 2.